(B)

Topic: Ownership of Registered Marks

Case: E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, vs SHEN DAR ELECTRICITY AND
MACHINERY CO., LTD.,
G.R. No. 184850

Facts:

EY Industrial Sales is a domestic corporation engaged in the production, distribution and sale of air
compressors. Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of compressors.

From 1997-2004, EY Industrial imported air compressors from Shen Dar. In 1997, Shen Dar filed a
Trademark Application with the Intellectual Property Office (IPO) for the mark “Vespa” for the use of air
compressors.

It was approved in 2007. In 1999, EY Industrial filed a Trademark Application also for the mark “VESPA”
for the use of air compressors. It was approved in 2004.

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS’ COR with the
BLA.14 In the Petition, Shen Dar primarily argued that the issuance of the COR in favor of EYIS violated
Section 123.1 paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the Intellectual
Property Code (IP Code), having first filed an application for the mark. Shen Dar further alleged that EYIS
was a mere distributor of air compressors bearing the mark "VESPA" which it imported from Shen Dar.
Shen Dar also argued that it had prior and exclusive right to the use and registration of the mark "VESPA"
in the Philippines under the provisions of the Paris Convention.15

In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark "VESPA" being
the sole assembler and fabricator of air compressors since the early 1990s. They further alleged that the
air compressors that Shen Dar allegedly supplied them bore the mark "SD" for Shen Dar and not "VESPA."
Moreover, EYIS argued that Shen Dar, not being the owner of the mark, could not seek protection from the
provisions of the Paris Convention or the IP Code. 16

Director of the BLA: issued its Decision dated May 29, 2006 in favor of EYIS and against Shen Dar, the
dispositive portion of which reads: WHEREFORE, premises considered, the Petition for Cancellation is, as
it is hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for the mark "VESPA"
granted in the name of E.Y. Industrial Sales, Inc. on 9 January 2007 is hereby upheld.

Let the filewrapper of VESPA subject matter of this case be forwarded to the Administrative, Financial and
Human Resource Development Services Bureau for issuance and appropriate action in accordance with
this DECISION and a copy thereof furnished to the Bureau of Trademarks for information and update of its
records.

IPO Director General: issued a Decision dated May 25, 2007 upholding the COR issued in favor of EYIS
while cancelling the COR of Shen Dar : the appeal is DENIED. Certificate of Registration No. 4-1999-
005393 for the mark VESPA for air compressor issued in favor of Appellee is hereby upheld. Consequently,
Certificate of Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters & Device for goods
air compressor and spot welding machine issued in favor of Appellant is hereby ordered cancelled.

CA: reversed the IPO Director General and ruled in favor of Shen Dar. the CA ruled that, despite the fact
that Shen Dar did not formally offer its evidence before the BLA, such evidence was properly attached to
the Petition for Cancellation. As such, Shen Dars evidence may be properly considered. The CA also
enunciated that the IPO failed to properly apply the provisions of Sec. 123.1(d) of RA 8293, which prohibits
the registration of a trademark in favor of a party when there is an earlier filed application for the same
mark. The CA further ruled that Shen Dar should be considered to have prior use of the mark based on the
statements made by the parties in their respective Declarations of Actual Use. The CA added that EYIS is
a mere importer of the air compressors with the mark "VESPA" as may be gleaned from its receipts which
indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be considered an owner
of the mark

Issue:
Whether EYIS is the true owner of the mark "VESPA"

Held:
Yes. EYIS must be considered as the prior and continuous user of the mark "VESPA" and its true owner.
Hence, EYIS is entitled to the registration of the mark in its name. RA 8293 espouses the "first-to-file" rule
as stated under Sec. 123.1(d) Section 123. Registrability. - 123. Under this provision, the registration of a
mark is prevented with the filing of an earlier application for registration. This must not, however, be
interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293 removed
the previous requirement of proof of actual use prior to the filing of an application for registration of a mark,
proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes
sufficient evidence to oppose the registration of a mark.

The Court has ruled that the prior and continuous use of a mark may even overcome the presumptive
ownership of the registrant and be held as the owner of the mark. As aptly stated by the Court in Shangri-
la International Hotel Management, Ltd. v. Developers Group of Companies, Inc.:37
Registration, without more, does not confer upon the registrant an absolute right to the registered mark.
The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered
mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can
overcome the presumptive ownership of the registrant and may very well entitle the former to be declared
owner in an appropriate case.
xxxx
Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and
use in trade or commerce. As between actual use of a mark without registration, and registration of the
mark without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly
entrenched, because it has come down through the years, is that actual use in commerce or business is a
pre-requisite to the acquisition of the right of ownership.
xxxx
By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the
trademark being applied for, he has no right to apply for registration of the same. Registration merely
creates a prima facie presumption of the validity of the registration, of the registrant’s ownership of the
trademark and of the exclusive right to the use thereof. Such presumption, just like the presumptive
regularity in the performance of official functions, is rebuttable and must give way to evidence to the
contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the parties, is that EYIS is the
prior user of the mark. The exhaustive discussion on the matter made by the BLA sufficiently addresses
the issue:

Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation engaged in buying, importing,
selling, industrial machineries and tools, manufacturing, among others since its incorporation in 1988.
(Exhibit "1"). Indeed private respondents have submitted photographs (Exhibit "376", "377", "378", "379")
showing an assembly line of its manufacturing or assembly process.

More importantly, the private respondent’s prior adoption and continuous use of the mark "VESPA" on air
compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the
name of respondent EY Industrial and Bills of Lading. (Exhibits "4" to "375"). Sales Invoice No. 12075 dated
March 27, 1995 antedates petitioner’s date of first use in January 1, 1997 indicated in its trademark
application filed in June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration
of Actual Use submitted on December 3, 2001 (Exhibit "385"). The use by respondent-registrant in the
concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods
as "VESPA" air compressors. Private respondents have sold the air compressors bearing the "VESPA" to
various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990’s. We carefully
inspected the evidence consisting of three hundred seventy one (371) invoices and shipment documents
which show that "VESPA" air compressors were sold not only in Manila, but to locations such as Iloilo City,
Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City to name a few. There is
no doubt that it is through private respondents’ efforts that the mark "VESPA" used on air compressors has
gained business goodwill and reputation in the Philippines for which it has validly acquired trademark rights.
Respondent EY Industrial’s right has been preserved until the passage of RA 8293 which entitles it to
register the same. x x x

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its decision. More importantly,
Shen Dar failed to present sufficient evidence to prove its own prior use of the mark "VESPA." We cite with
approval the ruling of the BLA:
[Shen Dar] avers that it is the true and rightful owner of the trademark "VESPA" used on air compressors.
The thrust of [Shen Dar’s] argument is that respondent E.Y. Industrial Sales, Inc. is a mere distributor of
the "VESPA" air compressors. We disagree.

This conclusion is belied by the evidence. We have gone over each and every document attached as
Annexes "A", "A" 1-48 which consist of Bill of Lading and Packing Weight List. Not one of these documents
referred to a "VESPA" air compressor. Instead, it simply describes the goods plainly as air compressors
which is type "SD" and not "VESPA". More importantly, the earliest date reflected on the Bill of Lading was
on May 5, 1997. (Annex – "A"-1). [Shen Dar] also attached as Annex "B" a purported Sales Contract with
respondent EY Industrial Sales dated April 20, 2002. Surprisingly, nowhere in the document does it state
that respondent EY Industrial agreed to sell "VESPA" air compressors. The document only mentions air
compressors which if genuine merely bolsters respondent Engracio Yap’s contention that [Shen Dar]
approached them if it could sell the "Shen Dar" or "SD" air compressor. (Exhibit "386") In its position paper,
[Shen Dar] merely mentions of Bill of Lading constituting respondent as consignee in 1993 but never
submitted the same for consideration of this Bureau. The document is also not signed by [Shen Dar]. The
agreement was not even drafted in the letterhead of either [Shen Dar] nor [sic] respondent – registrant. Our
only conclusion is that [Shen Dar] was not able to prove to be the owner of the VESPA mark by
appropriation. Neither was it able to prove actual commercial use in the Philippines of the mark VESPA
prior to its filing of a trademark application in 9 June 1997.39